French state takes controlling stake in Alstom

PARIS--France on Sunday clinched a deal to take a stake in Alstom, a move aimed at preserving the country's strategic interests in the face of a bidding war for the French engineering giant.

The transaction would make the state the main shareholder, give it voting rights in Alstom and pave the way for U.S. giant General Electric (GE) to buy the French group's energy business.

“We have a deal that was concluded this afternoon which allows the state to become the main shareholder of Alstom with a stake of 20 percent, in a manner that would ensure the sustainability of an alliance between General Electric and Alstom,” Economy Minister Arnaud Montebourg told France 2 television.

“Finally we have won the industrial battle with an alliance rather than an acquisition, a devouring, an absorption — which was not just the fear of the government, but also of many French people and workers' unions,” he said.

Alstom has been the focus of fierce bidding between GE and Siemens-Mitsubishi.

French President Francois Hollande's government had objected to the GE bid when it first emerged in April, on the grounds that jobs and decision-making could be lost.

It instead encouraged German giant Siemens to make a counter-offer, hoping that a Siemens-Alstom tie-up would create a global-scale European group. But Siemens linked up with Japan's Mitsubishi Heavy Industries to present a rival offer, which analysts say would lead to a breakup of Alstom.

On Thursday, the government made a U-turn and said it now favored GE's bid, before announcing a day later its intention to take a controlling stake in Alstom.

Under the agreement announced on Sunday, the state would have 20 months to acquire up to a fifth of Alstom shares currently held by French construction-telecoms conglomerate Bouygues at 35 euros per share.

The U.S. group's offer of 12.35 billion euros (US$16.8 billion) for the French group's energy business has now also won the blessing of Alstom's board of directors.

Alstom would now have to put the GE bid to employee representatives and gain regulatory approval related to foreign investment rules.